New Research on Social Enterprise Financial Sustainability
23 April 2010 at 2:18 pm
Social enterprises need to understand and adopt sustainable business operations, including moving the focus away from reliance on grant funding according to new research on social enterprise financial sustainability.
The report, Financing Social Enterprise: Understanding Needs and Realities has been produced by Foresters Community Finance. It was launched by the Parliamentary Secretary for Social Inclusion and the Voluntary Sector, Senator Ursula Stephens.
The report says social enterprise is not a magic solution for addressing wicked social problems, nor is it an alternative pathway for social sector organisations wishing to find ways to get off the funding treadmill. Rather, it is an addition to the stable of ways in which to address the most pressing issues facing society today.
The report has analysed the financial needs and realities of social enterprises in Australia which highlight the precarious nature of many of these businesses and the absolute courage and faith of the people who manage and run them for social purpose and impact.
It says social enterprise is a hard road – it is not for the fainthearted nor for idealists.
The report says what is clear from examining the financial reports of the social enterprises, is that cash flow represents a significant issue and that current instruments and structures are either largely inaccessible or inappropriate to their realities.
It says access to fair, equitable finance that is focused on developing the viability and sustainability of enterprises is a crucial part of developing the sector as a whole.
Key findings include:
- all forms of capital aimed at social enterprise can and should be structured as an incentive to develop capacity, build viability and move towards sustainability;
- there is a need for documentation and sharing of much more social enterprise specific tailored business practice rather than merely adopting practice from commercial sectors. In particular, there is a need for: social enterprise specific business planning templates; structured and tailored assessments of stages of development and capacity issues in social enterprise; and social enterprise specific financial metrics as a benchmark for performance. These should be developed by social enterprises or at least with high levels of participation from social enterprises;
- there is a need for capital and financial products to be developed with a clear view to their application in social enterprises;
- there is a need for specialised training and support for social enterprises (and stakeholders in this sector) across planning, operational, financial, balance sheet and social impact sustainability.
Foresters is planning a second phase of the research to design and test specific financial products and services (across grants, gifts, debt and equity capital). This second phase is due for completion in late 2011.
The report is available at: www.foresters.org.au